Regulated Stablecoins Face a Fork in the Road: Where to Go Next?

Author: imToken; Source: X, @imTokenOfficial; Compiler: Shaw, Golden Finance. From a macro perspective, the stablecoin market is undergoing a major reshuffle. In July, US President Trump signed the GENIUS Act, marking the official introduction of the first federal stablecoin law in the United States. In August, Hong Kong's Stablecoin Ordinance officially came into effect, becoming the first regulatory framework of its kind in the region. Meanwhile, Japan, South Korea, and other major economies are accelerating the development of rules allowing licensed issuers to bring stablecoins to market. In short, the market has entered a true "regulatory window." Stablecoins are evolving from gray area liquidity tools to financial infrastructure, achieving a parallel development between compliance and innovation. 1. Why focus on regulated stablecoins? Within the broader category, regulated stablecoins occupy a unique and critical position. Today, demand extends far beyond on-chain transactions. For crypto-native users, they remain essential for hedging and liquidity. For traditional institutions, they are increasingly viewed as tools for cross-border settlement, fund management, and payments. Historically, tokens like USDT have grown organically in response to demand. However, despite their scale, they operate in a regulatory gray area and have faced ongoing questions about transparency and compliance risks. Regulated stablecoins, by contrast, are built with compliance first: issued by regulated entities, licensed in their home jurisdictions, and backed by clear reserves and legal obligations. Simply put: a regulated issuer + the right license + transparent reserves and enforceable liabilities. Each token is linked to an identifiable regulator and custody arrangement that can be verified by users and institutions.

This is why these assets can circulate on-chain and appear in corporate documents and compliance reports—becoming an “official bridge” between traditional finance (TradFi) and crypto.

We view stablecoins through the lens of user needs—there is no longer a single narrative. In our framework, we categorize stablecoins into several user-oriented, practical categories. Within this framework, regulated stablecoins (such as USDC, FDUSD, PYUSD, GUSD, USD1, etc.) are not intended to replace USDT; rather, they operate in parallel—providing compliant, lower-risk channels for cross-border payments, institutional workflows, and other regulated use cases. If USDT's role is to provide "global cryptocurrency liquidity," the goal of regulated stablecoins is to embed stablecoins into the fabric of the financial system and daily life. II. Overview of Major Regulated Stablecoins While the paths may differ from place to place, the direction is converging: a shift from gray-area liquidity to regulated financial interfaces. Their uses are no longer limited to exchange matching and arbitrage, but have expanded to cross-border payments, corporate treasury management, and even everyday consumption. Globally, regulated stablecoins are evolving along several clear tracks. United States

• USDC (Circle): Backed by cash and short-term US Treasury bonds, USDC is regularly audited and redeemable 1:1. Widely adopted by institutions, it is one of the few tokens that appear in audited financial statements.

• USDP (Paxos): Issued and regulated by the New York Department of Financial Services (NYDFS). Its circulation volume is smaller than USDC, but it is clearly positioned for institutional payments and settlements. PYUSD (PayPal): Primarily intended for retail payments rather than transactions, it aims to introduce stablecoins into everyday consumption and cross-border transfers. Hong Kong, with the Stablecoin Ordinance coming into effect in August 2025, becomes the first jurisdiction to establish a comprehensive regulatory framework covering issuance, reserves, and custody. Stablecoins issued under this regime are considered regulated financial instruments rather than gray area assets. FDUSD (First Digital) is a prime example. JPYC, the first approved Japanese yen stablecoin under JPYC Inc., is issued under a money transmitter license and backed by liquid assets such as government bonds. Japan's Financial Services Agency (FSA) plans to approve more such projects as early as this fall. JPYC has completed remittance business registration and plans to issue it on Ethereum, Avalanche, and Polygon networks. South Korea: A regulatory sandbox in South Korea is testing the Korean won stablecoin for cross-border payments and B2B settlements. The commonality is clear: regulated stablecoins are not intended to replace USDT or USDC. Instead, they target scenarios where compliance and transparency are crucial. Its narrative is shifting from "gray liquidity for transactions" to "a legitimate interface for global finance." Different paths, same destination: Regulated stablecoins are becoming a parallel track to USDT—not aiming to seize liquidity dominance, but rather to provide a legal, auditable, and regulator-friendly option for institutions, cross-border capital flows, and everyday applications. III. What's Next? By 2025, the biggest structural shift in traditional finance (TradFi) will be the widespread adoption of regulated stablecoins. Competition will shift from scale and trading volume to regulatory depth and real-world adoption. Whether it's Hong Kong's pioneering regulations or the US's stricter oversight of USDC and PYUSD, the message they send is the same: stablecoins that truly serve global users and traditional capital are those that integrate off-chain compliance with on-chain architecture. The basis of competition is shifting—from "who holds the most dollar reserves" to "who can enter real-world use cases the fastest": cross-border settlement, corporate treasury management, and retail payments. A group of compliance-first players is emerging. For example: USD1. Leveraging strong traditional capital and policy ties, USD1 emphasized compliance and global applicability from the outset. With the political support of the Trump family, it achieved an astonishing "zero to one" success in just six months. Since March, its supply has soared to $2.1 billion, surpassing FDUSD and PYUSD to become the world's fifth-largest stablecoin (CoinMarketCap). USD1 is now listed on major CEXs including HTX, Bitget, and Binance, while PYUSD, despite having PayPal's brand backing, is still struggling to gain market acceptance. Meanwhile, liquidity-as-a-service infrastructure is emerging, aiming to make stablecoins not only on-chain transaction tokens but also globally callable settlement APIs. In the near future, cross-border payments, corporate treasury management, and even personal consumption may find a new balance between USDT's gray market liquidity and the whitelisting system of regulated stablecoins. From a broader perspective, this architecture is evolving into a diversified, parallel structure: USDT remains the liquidity engine of the global cryptocurrency market. Yield-bearing stablecoins satisfy capital growth needs. Non-USD stablecoins introduce a multipolar narrative. Regulated stablecoins are increasingly integrated into the real-world financial system. Over the past decade, USDT has embodied organic gray market growth, driving global cryptocurrency liquidity. Products like USDC bridge the gap between gray and white. Now, with the US GENIUS Act and related regulations in Hong Kong taking effect, as well as pilot programs in Japan and South Korea, regulated stablecoins are experiencing a true window of opportunity. This time, stablecoins will no longer solely serve on-chain users; they will appear in cross-border settlements, corporate treasury management, and everyday consumption. This is the essence of regulated stablecoins: transcending the cryptocurrency bubble and integrating into the regular practices of finance and daily life.